Swedish taxman sets sights on Second Life

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Swedes earning tax-free money on Internet games such as World of Warcraft and Second Life may have to think again after Swedish authorities said Wednesday they were planning a clampdown.

"We're not interested in ordinary gamers, 99 percent of them play for the sake of playing," Dag Hardysson, head of the Internet trade division of the Swedish tax authority, told AFP.

"Most people play and keep their money on their game account, but if they move it out of the virtual world into the real world, then we're interested in them."

He cited as an example a player in World of Warcraft who advances to a higher level and earns a virtual weapon which he then sells to another player for real money.

"That should be taxed as income, because he has worked for it in the real world," Hardysson said.

Another example was a fashion designer in Second Life who sells clothes in both the real and virtual worlds.

Hardysson said that while tax authorities were keeping a close eye on developments in the gaming world, he did not expect players to actually have to pay taxes for another two to three years.

"So far there are only a few people in Sweden who are earning big bucks this way," he said.

But, he stressed, "this market is going to grow. We're following developments and we'll see what happens."

Tax authorities still need to resolve the technical issues involved in controlling players, he added.

Second Life is an animated world where real people use proxies, called avatars, to "live" alternate identities in a virtual community, complete with homes, colleges, museums, shopping, dance clubs and even "avatar sex".

Enterprising young gamers have earned livings playing games such as Warcraft by selling online booty to those willing to pay to advance quickly through the different levels.

Thousands of people also reportedly supplement real-world incomes with cash earned in Second Life, where a woman recently claimed to have become a millionaire by selling virtual real estate through her avatar.